The IInternational

Th t ti lRRegulatory
l t
Reform Agenda: Implementation
Issues and Implications for Asian
Countries
Katharine Seal
International Monetary Fund

Financial Sector Stability

Stability,
Vietnam, October 29-30, 2015

Outline

Regulatory
R l R
Reform
f O
Overview
i

K
Key Elements
El off Regulatory
R l Reform
R f
Banking Basel III
SIFI framework
f k
Making Derivatives Markets Safer
T
Transparent t anddR
Resilient
ili t M
Market-
k t
based Financing

Implementation and Impact

2
Main Tenets of the Agenda all affect banks

Improve the banking sector's ability to absorb shocks, improve risk

management and governance , strengthen transparency and disclosures
Tackle too-big-to fail
Make derivatives markets safer
Transform shadow banking into transparent and resilient market based
financing

Progress by Reform Areas Year 6

Basel III

SIFI Framework

OTC Derivatives

Data Gaps

Shadow Banking

Accounting
3

Banking Basel III

4
 Evolution of the Capital Accord - content

Basel I Market Risk Basel II Basel 2.5 Basel III

Amendment

Basel I Minimum risk based capital, definition of capital

Market
M k t risk
i k ttreatment
t t iin th
the ttrading
di b
book;
k standard
t d d and
d iinternal
t l model
d l
MRA approaches
Credit Risk, Operational Risk standard and internal model approaches
Basel II Pillar
Pill 2 (supervisory
( i review
i process)) and
d Pillar
Pill 3 (Market
(M k Discipline)
Di i li )

Enhanced Market Risk standards

Basel 2.5 Securitisation enhancements

Definition of capital
Enhanced risk coverage
Basel III Leverage
Capital buffers: procyclicality and capital conservation; GSIB surcharge
Liquidity framework

Evolution of the Capital Accord - motivation

Basel I Market Risk Basel II Basel 2.5 Basel III

Amendment
1988 - 1st international agreement for minimum capital levels for
Basel I internationally active banks
1996 - Market Risk Amendment introduces decomposition by risk and
MRA permission to use internal model approaches
1995 Increased focus on risk sensitivity.
y
Desire to align regulatory capital and economic capital; widen model
Basel II approaches and recognise risk mitigation.
Supervisory scrutiny and transparency introduced as requirements

2007 1st response to financial crisis

Basel 2.5 Market risk and securitisation requirements tightened

2010 - the core of the crisis response

Basel III Back to basics on capital
First success for a liquidity framework
Basel III reforms target

Bank-level, or microprudential,
regulation, which will help raise
the resilience of individual
banking institutions to periods
of stress.

System-wide, or
macroprudential, risks that can
build up across the banking
sector as well as the procyclical
amplification
p of these risks
over time.
7

Basel III in a nutshell

Consistency

Restore
Capital confidence - Transparency

quality &
quantity Leverage and buffers

Stress survival

First
Maturity
Liquidity international transformation

standard
Liquidity horizon

8
Raising quality, consistency and
transparency off capital
i l

9
Definition of capital strengthened
8
D d i
Deductions ffrom capital
i lh harmonized
i d 4% Total
7 capital/RWA
2%
unchanged
Quality of Tier 1 and Tier 2 enhanced
6
Ti 2
Tier
Tier 3 eliminated
5 Other Tier 1
New ratios with greater focus on higher 4 Common Equity
quality
li capital:
i l
4.5% common equity/RWAs 3
Equity or other
6 % Tier 1 capital/RWAs
Higher Quality of
2
Capital
Total capital/RWA unchanged at 8% 4.5%
1 2%

0
Basel II Basel III
9

The buffer zone

Counter
C t
Cyclical

G-SIB/D-SIB

Capital
Conservation

CET1

10
 Capital Conservation Buffer

Comes on top of the regulatory

11

minimum: CET1 must first be used 10

to meet minimum Tier 1/RWA and

T t l Capital/RWA
Total C it l/RWA 9
Illustrative
M inimum

Must be met with CET1 (after the

Profit
8 Retention

application of deductions)
Rates:

7 0%

Calibrated as 2.5% of RWA

Conservation
20%

Buffer
6 40%

Banks are allowed to draw on the 60%

buffer during
g periods
p of stress (not
( 5 80%

in normal times) - buffer can go up 100%

and down
4

Constraints on earningsg distributions 3

(dividends, share buybacks, bonuses, 2

etc.) increase as capital ratios
approach the minimum requirement 1

0
Tier 2

Other Tier 1
11
Common Equity

Countercyclical Capital Buffer

Illustrative
Ill t ti
To protect the banking system from Minimum
Profit

excess credit growth. Retention

Rates:
0%
al
Countercyclica

It expands the conservation buffer

Illustrative

Buffer

Minimum 20%
Profit
Retention
Rates:
40%

Should be met with CET1 and other

other 0%
er

er
Conservation Buffe

Conservation Buffe

fully loss absorbing capital

20% 60%

40%

60% 80%

80%

Penalties for falling inside the buffer 100% 100%

range are the same as for the

conservation buffer

12 months to comply before

restrictions apply

Common Equity

Common equity or other fully loss absorbing capital

12
 Countercyclical Buffer: how could it work

Target countercyclical buffer is zero in all US Credit/GDP Gap

states of the cycle
y other than in periods
p 30.0
of excess aggregate credit growth
20.0

Threshold at national discretion: 10 0

10.0
credit/GDP gap and/or other relevant
indicators (e.g., asset prices gap) 0.0
1974 1979 1984 1989 1994 1999 2004 2009
-10.0
10 0
Target buffer increases in proportion to
the gap indicator, up to an upper limit of
2.5% of RWA (or higher at national Countercyclical Buffer
discretion) 30
3.0

2.5

The buffer is released on the basis of 2.0

indicators of systemic stress that pose a 15

1.5
risk to financial stability judgment is 1.0
required for both release and reactivation
0.5

00
0.0
1974 1979 1984 1989 1994 1999 2004 2009

13

Liquidity risk: the new metrics

Liquidity Coverage Ratio and Net Stable Funding Ratio

Two complementary metrics with different time horizons

Stock of High Quality Liquid Assets Available Amount of Stable Funding

> 100% > 100%
Net Stressed Cash Outflows over a 30 day period Required Amount of Stable Funding

LCR: short-term banks to NSFR: medium/long-term

maintain an adequate level - a full balance-sheet
balance sheet
of unencumbered, high metric that compares,
quality assets that can be under more prolonged
converted into cash to but less acute stress, an
meet liquidity needs for a estimate of reliable
30-day time horizon under funding sources to
an acute liquidity
q y stress required
q stable funding
g
scenario with 1 year horizon.
14
SIFI Framework
i
more intense i i
supervision

GSIB
Size
Identification Interconnectedness
Substitutability

GSIB list refreshed annually Global reach and Complexity

Supervisory judgment

Higher Loss Absorbency

HLA
CET1 Surcharge buckets
1-2.5% RWA
Surcharges Top bucket is empty
TLAC total loss absorbing capital

Recovery and Resolution

FSB Objective orderly least cost resolution

Powers wide range of early resolution powers

Key Attributes of Effective Scope all systemic financial institutions,
Resolution Regimes including non-banks
Cooperation coordinate recovery and
resolution planning

15

SIFI framework Global and Domestic

Systemically Important Banks

DSIB
BCBS 2012 D-SIB
D SIB framework
- 12 principles covering assessment
and higher loss absorbency

GSIB Identification methodology:

- Impact of failure > risk of failure

Capital Surcharge:
-Commensurate with systemic
importance
-CET1
CET1 Only

Home-Host coordination:
- home authority calibrates at
consolidated level,
- host calibrates at local level

Disclosure
- authorities to publish methodology
used

16
 Implementation the clock is ticking

17

Phase-in Arrangements
Phases 2013 2014 2015 2016 2017 2018 2019
Parallel run Jan 1, 2013 Jan 1, 2017 Migration to
Leverage Ratio
Disclosure starts Jan 1, 2015 Pillar 1
Minimum Common Equity Capital Ratio
3.50% 4.00% 4.50% 4.5%

Capital Conservation Buffer

0.63% 1.25% 1.88% 2.5%
Minimum common equity plus capital conservation
buffer 3.50% 4.00% 4.50% 5.13% 5.75% 6.38% 7.0%
C ap ital

Phase-in of deductions from CET1*

20% 40% 60% 80% 100% 100%
Minimum Tier 1 Capital
4.50% 5.50% 6.00% 6.0%
Minimum Total Capital
8.00% 8.0%
Minimum Total Capital plus conservation buffer
8.00% 8.63% 9.25% 9.88% 10.5%
Capital instruments that no longer qualify as
Phased out over 10 year horizon beginning 2013
non-core Tier 1 capital or Tier 2 capital
Liq u id ity

Liquidity coverage ratio minimum requirement

60% 70% 80% 90% 100%
Introduce minimum
Net stable funding ratio
standard
* Including amounts exceeding the limit for deferred tax assets (DTAs), mortgage servicing rights (MSRs) and financials.
transition periods
18
 Basel III de facto Global Standard

Basel III implementation gaining critical mass ahead of 2019 deadline,

consistency could be an issue
FSI 2014 survey: implementation status in 120 jurisdictions
27 Basel Committee members and 93 other jurisdictions
BCBS assesses consistency of implementation through RCAP program
Only for 27 Basel Committee members

Basel III Implementation

BCBS Others Total

2012 19 32 51
Basel III**
Implemented/in 2013 27 (all) 45 72
the process of
implementation
2014 27 (all) 77 104

__________________
Source: FSI 2014 survey on Basel II and III implementation, http://www.bis.org/fsi/fsiop2014.htm.
** A jurisdiction that has implemented at least one subsection of Basel III is deemed to be in the process of implementation.
19

Basel III implementation:

p Global Picture
indicates no implementation to-date indicates implementation in-progress indicates implementation complete / final rule in-force

Basel 2 Basel 2.5 Basel 3

2

)
k

v
CR

ap
lP

ris

co

er
1

Bs

Bs
cl
vP

vP

(L

fc
pp
A

ns
RB
RB

cy
kt

SI
sk

SI
A

AM
A

Liq

De

Country
SA

Co
Re

Re
P2

P3

Su

LR
TS

G-
D-
M
AI

C-
BI

Ri
FI

Angola
Botswana
Congo, D.R.
Gambia
Ghana
Guinea, Rep. of
Kenya
Lesotho

Africa
Liberia
Madagascar
Malawi
Mauritius
Mozambique
Namibia
Nigeria
Seychelles
South Africa
Tanzania
Uganda
Zambia
Zimbabwe

Australia
Bangladesh
Bhutan
China
Chinese Taipei
Cook Islands
Fiji

Asia-
Hong Kong SAR
India
Indonesia
Japan

Pacific
Korea
Macao
Malaysia
Nepal
New Zeland
Pakistan
Papua New Guinea
Philippines
Singapore
S i Lanka
Sri k
Thailand
Vietnam

Albania
Belarus
Belgium
Bosnia and Herzegovina
France
Germany
Gibraltor
Guernsey
Iceland
Isle of Man
Italy

Europe
Jersey
Kosovo
Liechtenstein
Luxembourg
Macedonia
Moldova
Montenegro
Norway
Russia
Serbia
Spain
Sweden
Switzerland
The Netherlands
United Kingdom

Argentina
Bahamas
Barbados
Belize
Bermuda
Bolivia
Brazil
British Virgin Islands
Canada
Cayman Islands
Chile

Western
Colombia
Costa Rica
Curaao and Sint Maarten
Dominican Republic

e sp e e
Hemisphere
Ecuador
El Salvador
Guatemala
Guyana
Haiti
Honduras
Jamaica
Mexico
Panama
Paraguay
Peru
Trinidad and Tobago
Turks and Caicos Islands
United States
Uruguay

Armenia

Middle East
Bahrain
Egypt
Georgia
Jordan

& Central
Kuwait
Kyrgyz Republic
Lebanon
Morocco

Asia
Oman
Qatar
Saudi Arabia
Tunisia
Turkey
United Arab Emirates

______________________
Sources: Bank for International Settlements, 2014, FSI Survey: Basel II, 2.5 and III Implementation: ttp://www.bis.org/fsi/fsiop2014.pdf; Bank for
International Settlements, 2014, Progress Report on Implementation of the Basel Regulatory Framework: http://www.bis.org/publ/bcbs281.pdf.
20
 Basel Framework Implementation in
Asia & Pacific
indicates no implementation to-date indicates implementation in-progress indicates implementation complete / final rule in-force

Basel 2 Basel 2.5 Basel 3

)
k

rv
CR

p
lP

ris

co
P1

P3

Bs

Bs
ca

se

cl
(L
A

pp
RB
RB

cy
kt

sk

SI

SI
n
A

v
AM

f
A

Liq
Country

De
SA

Re

Re

Co
P2

P3

Su

LR

G-
TS

D-
AI

C-
BI

Ri
FI
Australia
Bangladesh
Bhutan
China
Chinese Taipei
Cook Islands
Fiji
Hong Kong SAR
India
Indonesia
Japan
Korea
Macao
Malaysia
Nepal
New Zeland
Pakistan
Papua New Guinea
Philippines
Singapore
Sri Lanka
Thailand
Vietnam

______________________
Sources: Bank for International Settlements, 2014, FSI Survey: Basel II, 2.5 and III Implementation: ttp://www.bis.org/fsi/fsiop2014.pdf; Bank for
International Settlements, 2014, Progress Report on Implementation of the Basel Regulatory Framework: http://www.bis.org/publ/bcbs281.pdf.
21

Basel III Capital and Liquidity

Capital Shortfall (1) Large Banks Leverage Ratio (2) Large Banks
in Billions In Percent
6.0
400 384
5.0 4.4 4.6
4.0
300 4.0 3.5 3.7 3.7
3.4

Capital 200
198 3.0

115 2.0
100 58 1.0
15 4 0.0
0
June Dec. June Dec. June Dec. June
Dec. June Dec. June Dec. June
2011 2011 2012 2012 2013 2013 2014
2011 2012 2012 2013 2013 2014

Liquidity Coverage Ratio (3) Large Banks Net Stable Funding Ratio (3) Large Banks
In Percent 200
1,800
In Percent
400
100% minimum (2019) 100%
60% minimum (2015)
Stock of HQLA Available Stable Funding
300 150 minimum

Liquidity 200
_____ 100 ____
net cash out over 30d Required
50
Stable Funding
100

0 0

Large Banks Large Banks

__________________
Source: BCBS Basel III Monitoring Report
Report, March 2015
2015. Data as of June 2014
2014. Included banks are those that have Tier 1 capital in excess of 3 billion and are
internationally active. Notes: (1) The figures for are indicative of the minimum plus the capital conservation buffer and also include the capital surcharge for
G-SIBs, as applicable. (2) Figure represents fully phased-in Basel III leverage ratio. (3) The median value is represented by horizontal line separating the grey
and dark blue colors, with 50% of the values falling in the range shown by the box. The upper and lower end points of the thin vertical lines show the range of
the entire sample. The LCR sample is capped at 400% meaning that all banks with an LCR above 400% were set to 400%. For the NSFR sample, banks with an 22
NSFR above 150% are included in the calculation but are not shown in the graph.
 G-SIB Total Capital Adequacy Ratios

14.0%
12 3%
12.3%
11 7%
11.7%
12.0% 10.8%
10.2%
10.0% 9.5%
8.7%
8 1%
8.1%
8.0%
6.0%
4.0%
2 0%
2.0%
0.0%
June Dec.
Dec June Dec.
Dec June Dec.
Dec June
2011 2011 2012 2012 2013 2013 2014

__________________
Source: BCBS Basel III Monitoring Report, March 2015. Data as of June 2014.

23

Deeper Dive: consistent implementation?

BCBS Regulatory Consistency assessment Program

Main RCAP findings Timeline of RCAP assessments
Australia, Brazil, Canada, China,
Most countries implemented
EU, Japan, Singapore, Switzerland,
according to the internationally- USA, Mexico, Hong Kong SAR,
agreed schedule Finalized India, South Africa, Saudi Arabia
All countries rated overall
compliant
p except
p for the EU and US
Some inconsistencies exist in all
countries Russia

Not all deviations from Basel are Ongoing

sub-equivalent
A relatively large variance in RWAs
based on internal models is a
g , Indonesia,, Korea,,
Argentina,
common problembl Turkey
Planned

24
 Outcomes of RCAP for capital framework

Key components of the Basel framework Japan Singapore Switzerland China Brazil Australia Canada Hong Kong Mexico South Africa India USA EU
Oct-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Mar-15 Mar-15 Jun-15 Jun-15 Dec-14 Dec-14
Overall Grade C C C C C C C C C C C LC MNC
Capital requirements
Scope of application C C C C C C C C C C C C C
Transitional arrangements C C C C C C C C C C C C C
Definition of capital (LC) C LC C C LC LC C C C C LC LC
Pillar 1: Minimum capital requirements
Credit Risk: Standardised Approach C LC C LC LC C C C C C C LC LC
Credit risk: Internal Ratings-Based approach C LC LC C C LC C C C C C LC MNC
Credit risk: securitisation framework LC C C C C C C C C C C MNC LC
Counterparty credit risk rules C C C C C C C C C C C LC NC
Market risk: standardised measurement method LC C C C C C C C C C C MNC LC
Market risk: internal models approach C C C C C C C C N/A C C C C
Operational risk: BIA and Standardised Approach C C C C C C C C C C C N/A C
Operational risk: Advanced Measurement Approaches C C C C C C C N/A C C C C C
Capital buffers (conservation and countercyclical) N/A C C C LC C C C LC C C C C
Pillar 2: Supervisory Review Process
Leg and reg framework for the Supervisory Review Process C C C C LC C C C C C C C C
and for supervisory actions
Pillar 3: Market Discipline
Disclosure requirements C C LC LC C C C LC LC C C C C

Number of completed or planned leg/reg amendments 5 15 22 90 42 14 54 17 53 39 43 (3 areas) -

Compliant
Largely Compliant
Materially Non Compliant
Non Compliant

25

Thematic BCBS Assessments: RWA variation

Significant RWA variation across banks:

For
F b both
h TB andd BB standard
d d deviation
d i i off 24% to
30% from the mean
Banking book: using
sing a benchmark
benchma k portfolio,
po tfolio
differences in PD and LGD could result in CAR
variation of up to 20%
Most banks ok but outliers dispersion up to 8 times

Drivers similar for TB and BB:

About 75% of dispersion explained by underlying
differences in portfolios
25% of dispersion explained by different practices
and supervisory options
26
Policy response options
Some RW variation desirable:
Portfolio choices
Market/economic cycle differences
Healthyy diversityy in risk models
Excessive variation to be addressed:
Undermines credibility of capital standard
Impairs comparability of banks
Distorts the level playing field
H
Hampers the
th functioning
f ti i off financial
fi i l markets
k t
Policy options:
Increase disclosure
Review national discretions
Introduce benchmarks and floors
Constrain the use of models
27

Impact of reforms

28
Basel III impact: social costs and benefits

Capital
p &
Liquidity Benefits Costs
Requirements
Better
B tt systemic
t i
Higher cost/lower
Capital resilience
efficiency of
Better quality
intermediation (?)
Better risk
recognition Better RM incentives
Floor on risk
Less procyclical Lower credit supply
Higher K/RWA &
leverage and credit (?)
buffers

Lower likelihood of
Liquidity
crises Slower (short-term)
Liquid assets
buffer output growth (?)
Higher
g (long-term)
( g )
Lower maturity output growth
mismatch
29

Regulatory reform impact

Increased
buffers

Regulatory Regulatory
Cause? Success
Reduced
leverage

Better funding
structures

30
Banks business models are adjusting

Retreat from trading and interbank

y
activity
Increase in liquid assets

Lower short-term wholesale funding

Greater emphasis on retail deposit

taking
ki
Adjustments are not uniform across
banks and regions
31

Sectoral and regional adjustments

GSIBs making the greatest adjustments

Investment banks affected more than

commercial
i lb
banks
k

Asian banks less constrained for capital and

liquidity are expanding balance sheets

Asian and US banks increasing share of project

finance, as European banks share retreats

32
 Profitability decreased due to various factors

All Global Banks Sample of GSIBs DSIBs

30% 30% 30%

25% 25% 25%

20% 20% 20%

16%
12%
6%
15% 15% 15%

10% 10% 10%

5% 5% 5%

0% 0% 0%
RoE 2006 Increased Other RoE 2013 RoE 2006 Increased Other RoE 2013 RoE 2006 Increased Other RoE 2013
Capital Factors Capital Factors Capital Factors
Requirements Requirements Requirements

Note: Other operating income includes Commission income, Trading income and Impairments on securities portfolios
Sources: SNL; and IMF staff calculations; Sample defined as having min. 175 bn in assets total 87 banks. 33

Global banks have reduced their global reach

Cross-Border and Local Claims Relative to

T t lB
Total Banking
ki A
Assets
t off R
Recipient
i i tC Countries
t i
(Percent)
14.0

12.0 13.3

10.0

8.0 9.2
8.5
7.5
6.0

4.0

2.0

0.0
2007 2013 2007 2013
C
Cross-Border
B d Claims
Cl i L
Local
l Cl
Claims
i
Sources: Bank for International Settlements (BIS), Consolidated Banking Statistics; IMF, International Financial Statistics database; and IMF staff
calculations. Note: Claims include deposits and balances placed with other banks, loans and advances to banks and nonbanks, and holdings of
securities and participations. International claims include cross-border claims and local claims in foreign currency. 34
and retrenched from market making & trading

Asset Allocation by Business Line

(Percent of Total Assets)
Securities Corporate & Commercial Retail Other

100% 7 11
90%
21
80% 18

70%
17
60%
36
50%
40%
0
30% 55
20% 35
10%
0%
2007 2014
Sources: Company filings and annual reports; Bloomberg, L.P.; and IMF staff calculations.
Note: Includes reported business line-level asset allocations of 22 GSIBs. Securities category includes all securities-related businesses, with
share decline primarily resulting decline in trading book. Corporate & commercial and retail categories include predominantly lending
businesses. 35

Corporate financing by non-banks is increasing

Corporate Liabilities by Counterparty Type (in percent of total)

United States EU
100% 100%
90% 90% 24
80% 80% 35

70% 70%
60% 80 60%
86
50% 50% Non-Banks

40% 40% 76 Banks

30% 30% 65

20% 20%
10% 20 10%
14
0% 0%
2008 2014 2008 2014
Source: IMF
36
Market Liquidity increased risks?

Turnover: Trading Volumes versus AUM of Mutual Funds and ETFs

Outstanding
d (ratio) ($U S T
($U.S. Trillions)
illi )
0.25 2 1
U.S. corporate bonds (left scale)
Emerging market fixed income
Emerging market sovereign bonds (right scale) 0.9 European
p high
g yield
y
U.S. loans
0.20 1.6 0.8 U.S. high yield

0.7

0.15 1.2 0.6

0.5

0.10 0.8 0.4

0.3

0.05 0.4 0.2

0.1

0 0 0
2006 2007 2008 2009 2010 2011 2012 2013 2007 2008 2009 2010 2011 2012 2013 2014

Source: IMF
37

Is the regulatory reform agenda suitable for

all jurisdictions?

Fund supports transition to regulatory standards

that are suitable and meaningful for the jurisdiction

Reforms target internationally active banks and

markets adapting the local phasing and calibration
nd
Siimplicity an

i k
is key

Consistent and coordinated implementation helps

resist regulatory arbitrage
ailorring

Capacity constraints matter. Regulatory reform is

not necessarily the most urgent priority.
ta

38
 General principles
Sound Typically a work-in-progress
regulations
Pre-conditions need to be in place or regulatory reforms are
undermined

Each jurisdiction works at a different pace and has its own

Case by
unique issues
case
approach Recommendations for implementing regulatory agenda need to
be assessed in the context of the quality of existing regulations
and supervisory framework

Capacity Regulatory
l reform
f is a trade-off
d ff from
f other
h competing priorities
constraints
Financial analysis and risk assessment are essential and may
39
need to come before regulatory reform

Common Challenges

Capacity Building

C lt
Cultural
l Ch
Change

Data
ata Availability
a ab ty a and
d Reliability
e ab ty

40
 EMDE implementation challenges

Data intensive
Liquidity HQLA
approaches
shortages
(CCyB)

Indirect impact Shallow

via home-host markets

BCBS
Direct impact Different
on non i
implementation
l t ti
members phases

41

Prioritizing implementation of Basel

Short-term Medium-term Longer-term

Priority Priority Priority
Basel II Pillar 1
Basel III CCyB
Standardized Approaches Basel II Pillar 3 (disclosure)

Basel II Pillar 2 (ICAAP &

Basel III D-SIB
SREP)
Basel III LCR
Basel III Basel II Advanced
Definition of Capital approaches

Basel III Capital Basel III Leverage ratio

Basel III NSFR
Conservation Buffer

42
Questions?

43

Background slides

44
Basel Framework Implementation in
Africa
indicates no implementation to-date indicates implementation in-progress indicates implementation complete / final rule in-force

Basel 2 Basel 2.5 Basel 3

)
k

rv
CR

p
lP

ris

co
P1

P3

Bs
ca

se

cl

IB
(L
A

pp
RB
RB

cy
kt

sk

SI
n
A

v
AM

f
A

S
Liq
Country

De
SA

Re

Re

Co
P2

P3

Su

LR
TS

G-
D-
AI

C-
BI

Ri
FI
Angola
Botswana
Congo, D.R.
Gambia
Ghana
Guinea, Rep. of
Kenya
Lesotho
Liberia
Madagascar
Malawi
Mauritius
Mozambique
Namibia
Nigeria
Seychelles
South Africa
Tanzania
Uganda
Zambia
Zimbabwe

______________________
Sources: Bank for International Settlements, 2014, FSI Survey: Basel II, 2.5 and III Implementation: ttp://www.bis.org/fsi/fsiop2014.pdf; Bank for
International Settlements, 2014, Progress Report on Implementation of the Basel Regulatory Framework: http://www.bis.org/publ/bcbs281.pdf.
45

Basel Framework Implementation in

Europe
p
indicates no implementation to-date indicates implementation in-progress indicates implementation complete / final rule in-force

Basel 2 Basel 2.5 Basel 3

2

)
k

rv
CR

p
lP

ris

co
P1

P3

Bs
ca

se

IB
(L

c
A

pp
RB
RB

cy
kt

sk

SI
n
A

v
AM

f
A

S
Liq

Country
De
SA

Re

Re

Co
P2

P3

Su

LR

G-
TS

D-
AI

C-
BI

Ri
FI

Albania
Belarus
Belgium
Bosnia and Herzegovina
France
Germany
Gibraltor
Guernsey
Iceland
Isle of Man
Italy
Jersey
Kosovo
Liechtenstein
Luxembourg
Macedonia
Moldova
Montenegro
Norway
Russia
Serbia
Spain
Sweden
Switzerland
The Netherlands
United Kingdom

______________________
Sources: Bank for International Settlements, 2014, FSI Survey: Basel II, 2.5 and III Implementation: ttp://www.bis.org/fsi/fsiop2014.pdf; Bank for
International Settlements, 2014, Progress Report on Implementation of the Basel Regulatory Framework: http://www.bis.org/publ/bcbs281.pdf.
46
Basel Framework Implementation in
the Western Hemisphere
p
indicates no implementation to-date indicates implementation in-progress indicates implementation complete / final rule in-force

Basel 2 Basel 2.5 Basel 3

)
k

rv
CR

p
lP

ris

co
P1

P3

Bs

Bs
ca

se

l
(L

c
A

pp
RB
RB

cy
kt

sk

SI

SI
n
A

v
AM

f
A

Liq
Country

De
SA

Co
Re

Re
P2

P3

Su

LR

G-
TS

D-
AI

C-
BI

Ri
FI
Argentina
Bahamas
Barbados
Belize
B
Bermudad
Bolivia
Brazil
British Virgin Islands
Canada
Cayman Islands
Chile
Colombia
Costa Rica
Curaao and Sint Maarten
Dominican Republic
Ecuador
El Salvador
Guatemala
Guyana
Haiti
Honduras
Jamaica
Mexico
Panama
Paraguay
Peru
Trinidad and Tobago
Turks and Caicos Islands
United States
Uruguay

______________________
Sources: Bank for International Settlements, 2014, FSI Survey: Basel II, 2.5 and III Implementation: ttp://www.bis.org/fsi/fsiop2014.pdf; Bank for
International Settlements, 2014, Progress Report on Implementation of the Basel Regulatory Framework: http://www.bis.org/publ/bcbs281.pdf.
47

Basel Framework Implementation in

the Middle East & Central Asia
indicates no implementation to-date indicates implementation in-progress indicates implementation complete / final rule in-force

Basel 2 Basel 2.5 Basel 3

2

)
k

rv
CR

p
lP

ris

co
P1

P3

Bs
ca

se

cl

IB
(L
A

pp
RB
RB

cy
kt

sk

SI
n
A

v
AM

f
A

S
Liq

Country
De
SA

Re

Re

Co
P2

P3

Su

LR
TS

G-
D-
AI

C-
BI

Ri
FI

Armenia
Bahrain
Egypt
Georgia
Jordan
Kuwait
Kyrgyz Republic
Lebanon
Morocco
Oman
Qatar
Saudi Arabia
Tunisia
Turkey
United Arab Emirates

______________________
Sources: Bank for International Settlements, 2014, FSI Survey: Basel II, 2.5 and III Implementation: ttp://www.bis.org/fsi/fsiop2014.pdf; Bank for
International Settlements, 2014, Progress Report on Implementation of the Basel Regulatory Framework: http://www.bis.org/publ/bcbs281.pdf.
48
 FSB/G20: Key references

htt
http://www.financialstabilityboard.org/about/or
// fi i l t bilit b d / b t/
ganisation-and-governance/

http://www.financialstabilityboard.org/2015/02
/fsb chairs letter to g20 on financial
/fsb-chairs-letter-to-g20-on-financial-
reforms-finishing-the-post-crisis-agenda-and-
moving-forward/(February 2015)

http://g20.org/
https://g20.org/wp-
https://g20 org/wp
content/uploads/2014/12/2015-TURKEY-G-
20-PRESIDENCY-FINAL.pdf
p

49

Impact of Regulatory Reform References

Elliott, Salloy and Santos (2012):

Focused on long-run impact
Found benefits in terms of less frequent and less costly financial crisis
expected to outweigh the costs of regulatory reforms in the long run
http://www.imf.org/external/pubs/ft/wp/2012/wp12233.pdf

FSB EMDE Study (2012) and Monitoring (2013, 2014):

Found widespread support among surveyed EMDEs for the objectives of
regulatory reform
but varied views of impact on their financial systems (i.e., different
countries affected differently)
http://www.financialstabilityboard.org/wp-
content/uploads/r_120619e.pdf
http://www.financialstabilityboard.org/wp-content/uploads/Monitoring-
p // y g/ p / p / g
the-effects-of-reforms-on-EMDEs.pdf

Institute of International Finance Report (2011) :

Found that only well-designed,
well designed, appropriately sequenced, globally-
globally
enforced regulatory reforms able to deliver long-run benefits to the global
economy
but noted results highly sensitive to models used and assumptions
regarding the behavior of banks
banks investors
Focused short- to medium-term term transition effects
https://www.iif.com/file/7080/download?token=CwKXtHfb
50
 Hidden challenges one example:
LCR

Emerging
E i and d smaller
ll Practical
P i l
economies: recommendations
Li
Limited
i d availability
il bili off Hi
High
hQQuality
li Li
Limited
i d benefits
b fi ffrom expansion
i
Liquid Assets (HQLA) of level 2 assets and Basel ALA
options
Run-off assumptions for deposits
A cautious approach is important
Complexity QIS

Deposit run-off characteristics

vary among jurisdictions
j i di ti

51